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level: Provisions and Contingencies

Questions and Answers List

Question	Answer
What is a provision?	"A liability of uncertain timing or the amount."
What is a contingent asset?	An asset that may be resulted but is uncertain.
How is the recognition of provisions accounted for?	Dr. Expenses Cr. Provisions
What are the criteria for the recognition of provisions?	- The entity has a present obligation - It is probable that there will be an outflow of economic resources to settle the obligation - A reliable estimate of the obligation can be made
If there is a probability of a liability what should be done?	It should be provided for.
If it is almost certain that there will be a contingent asset, what should be done?	It should be recognised.
If there is the probability of a contingent asset, what should be done?	There should be a disclosure note made in the financial statement.
If there is a possibility that there will be a contingent liability, what should be done?	There should be a disclosure note made in the financial statement.
If there is a possibility that there will be a contingent asset, what should be done?	It should be Ignored
If there is a remote chance that there will be a contingent asset, what should be done?	It should be Ignored
If there is a remote chance that there will be a contingent liability, what should be done?	It should be Ignored
When should contingent liabilities be provided for in the financial statements?	When it is probable that they will arise.